Rallying Pharma's Rebels

Matthew Herper
,
Forbes Staff
I cover science and medicine, and believe this is biology's century.

Bernard Munos

From the 08.22.11 issue of Forbes Magazine: Bernard Munos has a radical idea to save the drug industry: Take bigger risks and cut R&D.

It’s no secret that the pharmaceutical industry is suffering. With too few breakthroughs and stagnant finances, the stocks of some of the industry’s biggest players, including Pfizer and Merck, are down 40% from a decade ago. The industry has cut 300,000 jobs in the last ten years as the number of new drugs making it to market slowed to a trickle.

Bernard Munos, 61, who worked in sales for 30 years at Eli Lilly, has spent the past decade studying pharmaceutical innovation. He thinks he has an answer to what ails Big Pharma: Cut research and development.

That’s just part of his prescription for changing how medicines are invented. Munos says the drug industry needs to spend research money in an entirely new way. Instead of chasing improvements to blockbuster drugs that help lots of people a little bit, it should focus on true breakthroughs that help patients a lot. And rather than do the research in-house, companies should close their labs and outsource the work to tiny, nimble startups that can explore bigger, crazier ideas.

“You cannot script innovation,” Munos says. “You cannot boil it down to a code of best practices. Because it is unpredictable and the opportunities in science do not match the opportunities in markets.”

Corey Goodman: "We need transformational change."

Munos' scorched-earth scheme is radical, but he’s fast gaining followers among a generation of entrepreneurial bioscientists fed up with the way the corporate world makes drugs. Corey Goodman, a former Pfizer executive and founder of biotechs such as Exelixis, a drug developer, and Second Genome, a genetics firm, is one of them. “These are things that the management of all the top companies knows,” he says. “Bernard put on the table that we don’t just need a Band-Aid. We need transformational change.”

At first glance Munos seems an odd revolutionary. After starting out in animal health, he helped restructure Lilly’s business in Latin America. He pioneered new ways of doing market research, then ran sales in Portugal, where his team broke sales records. He led marketing organizations in Eastern Europe and in Russia before returning to the U.S. as a special advisor to Lilly’s top executives.

But after decades of fixing broken divisions and auditing managers, he was bored and yearned to address questions that had been “burning my tongue for years.” What was wrong with research? Why was productivity plunging as expenses soared? “We spend billions each year to get innovation, but where does innovation come from, and how do we get more of it?” asks Munos. “No one had a clue. Crude ideas about innovation pervaded not only the company but also the industry. This is an industry that spent tens of billions of dollars to create innovation but had not created tools to measure it.”

Looking for answers, he started pulling data from the Food & Drug Administration, from company filings with the Securities & Exchange Commission, from any other source he could find. After a decade of digging he’s come to the conclusion that the pharmaceutical industry “is imploding in slow motion” and could fail completely unless it adopts a whole new model of drug development.